Dire predictions for family incomes

Austerity measures and economic stagnation are set to wipe £2,500 off families' incomes in just three years, it has been claimed.

PUBLISHED: 00:13, Wed, Nov 30, 2011

George Osborne has extended the austerity programme beyond the next general election [PA]

Austerity measures and economic stagnation are set to wipe £2,500 off families' incomes in just three years, it has been claimed.

By the time of the next general election, the massive squeeze will have wound back more than a decade of rising wealth.

The dire predictions were made by the influential Institute for Fiscal Studies (IFS) in the wake of Chancellor George Osborne's autumn statement.

At a briefing for journalists, the think-tank's director Paul Johnson said he was "running out of superlatives" to describe the extent of the problems.

He estimated that median household incomes would drop by 7.4% in real terms between 2009/10 and 2012/13 - the equivalent of £48 a week for a couple with two children.

The average was expected to be lower in 2015/16 than it was in 2002/03.

By then, disposable income per capita would still be less than 2006 levels. The UK's previous worst decade on that measure saw growth of 14%.

Mr Johnson highlighted how quickly the country's position had deteriorated since the Budget in March, when there appeared to be a "fair bit of headroom" for the Chancellor to achieve his target of eliminating the deficit by 2015.

To deal with an extra £111 billion of borrowing by 2016, Mr Osborne had pencilled in two more years of unspecified "substantial spending cuts" amounting to £15 billion.

"That will extend to six years the period for which total spending will have been cut year on year," Mr Johnson said. "One begins to run out of superlatives for describing quite how unprecedented that is. Certainly there has been no period like it in the UK in the last 60 years."